Finance ministry reviews risks from rising global long-term rates

The finance ministry said Friday it convened a joint market-monitoring meeting as rising long-term rates in major economies posed risks to South Korea's financial and foreign-exchange markets. Officials attributed the increase, particularly in ultra-long maturities, to continuing Middle East uncertainty, increased government bond issuance and expanded corporate bond issuance by global artificial-intelligence companies.

Deputy Prime Minister and Finance Minister Koo Yoon-cheol chaired the Aug. 21 meeting at the Korea Federation of Banks. Financial Services Commission Chairman Lee Eog-weon, Financial Supervisory Service Governor Lee Chan-jin and Bank of Korea Senior Deputy Governor Park Jong-woo attended.

Officials agreed to closely watch the domestic bond market and assess how higher rates could affect financial markets, funding costs for companies and households, and the real economy. They will prepare and announce support measures to ease debt burdens for small-business owners and financial strains on vulnerable borrowers.

The won-dollar exchange rate entered the 1,300-won-per-dollar range for the first time in 11 months after reaching 1,550 won per dollar at the start of July. Officials cited the current-account surplus and easing foreign investors' stock rebalancing as support for the won, while seeing risks in both directions from Middle East geopolitical conflict and monetary policy in major economies.

Household debt continued to grow in aggregate, although its ratio to gross domestic product fell and remained high relative to major economies. Officials said they would continue managing household debt while supporting end users facing funding difficulties.